After paving their way into the luxury art space, NFTs could be the next big thing in the fashion tech world. The post-pandemic recovery did not turn out quite as expected with stores still struggling to understand erratic buying patterns and demand fluctuations. This paradigm shift has created a performance pressure on the digital front, pushing brands to get creative and secure revenues. Even with a dystopian background, innovative brands seem to be embracing the burgeoning crypto-mania.
NFTs(Non-fungible tokens) are essentially unique crypto tokens backed by blockchain technology that can be attached to both digital and non-digital assets, acting as a certification of authenticity. On a fundamental level, the innate nature of NFTs make them tailor-made for digital fashion. Fashion and luxury brands can leverage three main attributes of NFTs:
Uniqueness. Ability to create a unique product identity and authenticate ownership make NFTs a logical tool for combatting the challenge of duplication of high value goods and infiltration ofcounterfeit merchandise. Every year, luxury brands lose a considerable amount of revenue to these activities. NFTs can curb this situation, if not eradicate it completely.
Resale and Royalty. NFTs allow a 360 degree transparency of the product sale process, allowing brands and owners to track the product lifecycle with utmost granularity. As such,NFTs foster a mature ecosystem for digital creators to gain from secondary market sales which are difficult to facilitate in a physical market set-up. Smart contracts fabricated in tandem with NFTs can support a see-through commission model that rewards the original creator each time there is a transfer of ownership.
Permanence. Luxury items and collectibles are often passed onto future generations along with the appreciated monetary value over time. As NFTs are made on a block chain platform, the high security code makes the certification almost indestructible and timeless. Attaching this to physical products can bolster the collector’s claim to own a genuine article, making future auctions and sale much easier.
Genius brands such asGucci are still in talks with digital creators to officially adopt NFTs into their mainstream business. However, there are some brands that have already taken a stab at it. Innovative brand RTFKT specializes in creating NFT-backed digital artifacts, recently raising$8 million in a seed funding round led by Andreesen Horiwitz. Soon enough, RTFKT went viral with its virtual sneaker designs and unique digital collaborations. A recent limited-edition digital collection betweenRTFTK and Jeff Staple was welcomed by fans and the high value digital assets sold out in a flash.
Luxury brand, Jacob & Co. also made its crypto debut by setting up an auction for its first ever NFT watch, fetching $100,000 in value. This auction has set a benchmark value forHigh-End Digital Assets (HELDAs) and confirms customer demand as well. This NFT is essentially a 10-second animation video of a watch face that displays cryptocurrencies like Ethereum and Bitcoin; the watch comes in a digital box and is a ‘one of a kind’ piece.
Currently, the adoption of NFTs into digital fashion is limited to a few daring brands, but it is expected that more tech savvy brands will join the party. Skeptics are still questioning the actual intrinsic value of NFTs, however combining physical goods with NFTs from an ownership authentication perspective seems more logical. At this nascent stage, brands should experiment with small digital-only collections, limited edition collaborations and in-game digital assets to gauge audience response before rolling out a full-fledged NFT based ecosystem.